The Future of Benefits Has No Assembly Required

We live in a world where the products we use and the services with which we engage are curated specifically for us. Netflix shows us the movies they think we’ll like, Amazon recommends products that complement our previous purchases, and Spotify knows our favorite tunes. It’s obvious that employees should expect the same level of curation in the perks and health benefits they get from their employers.

Traditional benefits, however, are typically off-the-shelf plans from large insurance carriers. The plans usually require assembly from a complex menu of dental care, vision care, hospital expenses, prescription drugs, healthcare equipment, and a handful of other items. They are generic, non-personalized and inflexible across all employees. In other words, today’s plans assume that a single 20-something has the same needs as a mother with two children just because they happen to work for the same company. 

Why Does HR Continue to Work With a Poor Model?

Because of inertia. The old model persists because insurance carriers still rely on archaic infrastructure that does not allow for multiple degrees of personalization. Insurance carriers also lack the capabilities to build new technology platforms that can pull these insurance products into a modern user experience. 

Over-complication and unhelpful UX leads to low engagement. A recent AFLAC survey reported 67% of employees said that just reading about their benefits plans is “time-consuming, complicated, or stressful.” Generally speaking, carriers are not economically incentivized to adjust their model because every year employers pay large premiums for staff coverage, regardless of whether employees use or get value from the plan.

In a Covid-stricken world, though, employers must pay special attention to the health and wellbeing of their people as individuals. That means offering benefits catered to their specific needs. If one employee values having a new pair of glasses and massage therapy more than another person who needs prescription drugs, both individuals should be able to obtain those items without breaking the benefits plan. 

And if that employee’s situation changes, and they need more dental coverage than anticipated, coverage should adapt dynamically. It should also allow the person to buy a gym subscription, some extra professional training, childcare ,and a Costco membership. 

The ultimate experience would allow employees to select options they value the most.

Ditching Pre-Determined Benefits

The closest model to this personalized world is the current form of health spending accounts (HSAs) and wellness spending accounts (WSAs), which are more limber than the off-the-shelf plans. They allow employees to make discretionary purchases, with the former focused on tax-deductible healthcare items and the latter focused on everything else. 

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However, most HSA and WSA products today are stuck in the dark ages, requiring out-of-pocket spending and complex claims processes. They’re hard to use and certainly fall short of a delightful experience. 

The next generation of employee benefits will likely take the form of an employer-funded prepaid debit card and a mobile app companion. Companies like Aya, Starship, and Lively have already started this mission to improve the user experience for employer-sponsored benefits. 

Very soon, employees won’t need to select from a menu of pre-determined benefits options or even submit expense claims after paying out of their own pocket. They’ll just need to decide what’s important to them and swipe their card, like any other purchase. So the 20-something and the mother of two, who have vastly different needs, can be on the same “plan” but access truly personalized healthcare services. 

The icing on top is that employers only need to pay for what their employees actually use, plus an administrative fee, so there is full transparency on the economics. Very soon, employees will take control of their health benefits and choose to spend on the things they care about most. No assembly required. 

Karim Gillani has an extensive background in fintech, mobile tech, engineering, finance and strategy. Prior to co-founding Luge, Karim led corporate development and M&A activities for PayPal in Canada. Before that, Karim started the corporate development practice at Xoom, a leading cross-border remittance company that was publicly-listed on the NASDAQ in 2013 and subsequently acquired by PayPal in 2015 for USD $890M.

Matthew Jones is a managing director at Anthemis, where he is responsible for sourcing, analyzing, and executing investments, as well as providing support for Anthemis’ portfolio companies. He brings in-depth knowledge of the insurance sector and focuses on investments in insurance and risk-related technology. His areas of interest include analytics and data, artificial intelligence and automation, asset management, digital health, new insurance propositions, risk management, and mobility. 

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